Intraday Market Thoughts

USD Consolidates Losses; EFSF Role Mulled

by Patrik Urban
Feb 8, 2012 12:45

Greek leaders meeting postponed; German auction; Swiss unemployment rose and German trade surplus declined. Market awaits Canadian housing starts, oil inventories and at the end of the session NZD labor market data. Latest Intermarket Insights will be out after the London close.

EURUSD fell shy of gaining above the $1.33 level as USD trades within a narrow range close to London opening levels. European equities are gaining about 0.5%.

The meeting of Greek leaders scheduled to start at 6 am EST where they should respond to bailout conditions is delayed. It seems that a provisional agreement with the ECB/IMF/EU has been reached but some specific issues remain to be discussed. Greek PM Papademos said he hopes to present the final agreement for approval at the meeting of Eurozone finance ministers.

According to a WSJ report, the ECB is said to consider selling its Greek debt to the EFSF in exchange for EFSF bonds. The ECB bought the Greek bonds at a heavily discounted price but it appears as though most of the profits a reported 11B euros will be foregone. This could cause problems with no-bailout provisions in the ECBs treaty but thats unlikely since the ECB will not lose any money.

Germany sold EUR 3.293 bln of 2017 bond (target EUR 4 bln). The average yield rose marginally to 0.91% from 0.9% and cover declined to 1.8 from 2.8. According to MNI, the whole Eurozone has issued about 15% of its total 2012 funding targets.

On the European data front, Swiss unemployment rate ticked up in January to 3.4% from 3.3 n.s.a. (remained 3.1% s.a.) and German trade surplus declined to EUR 13.9 bln from EUR 14.9 bln.

ECB deposits declined slightly to EUR 495.35 bln.

The US session starts at 8:15 EST am when Canadian housing starts are due and are expected to decline slightly in January to 193K from previous 200K.

Crude oil inventories are due at 10:30 am EST and are expected lower at 2.9M from previous 4.2M. Such a decline could further fuel soaring WTI that trades nearly 4 USD higher from yesterday's low at 96.

At the end of the session at 4:45 pm EST, New Zealand will release labor market data that could boost the already strong NZD. The employment is expected to rise 0.4% in Q4 from 0.2% and the unemployment rate is seen marginally lower at 6.5% from 6.6%.

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